WASHINGTON (Reuters) – President Barack Obama's tax plan got a boost on Tuesday when a top Democrat in the House of Representatives, where the plan faces its stiffest resistance, said there were "compelling reasons" to back it.
The bullish comments from Democratic Majority Leader Steny Hoyer signaled opposition is dissipating among Democrats who believe that Obama's $858 billion tax deal, brokered with the opposition Republicans, is too generous to the wealthy.
The Senate cleared a key procedural hurdle on Monday, with a bipartisan group of 83 of the 100 members voting in favor of moving the bill forward.
The plan extends all Bush-era individual tax rates, prevents a spike in taxes on capital gains and dividends and renews long-term insurance for the jobless, among other measures.
"The vote in the Senate indicates an urgency that is felt by a broad spectrum that the middle-income taxes not be increased come January 1," Hoyer said in a briefing with reporters.
"Rarely do you see that big a number" in support of a bill, Hoyer said, also noting a swath from the very liberal to the very conservative backed it.
Obama and most of his fellow Democrats had pushed for extension of the tax cuts enacted by former President George W. Bush only on household income of up to $250,000.
But Democrats lost control of the House and saw their margins shrink in the Senate in the November 2 elections, pushing Obama to strike the deal before the bolstered Republicans take more power in January.
Economists have boosted growth forecasts based on the bill's likely passage, citing in particular a one-year cut in the payroll tax and removal of uncertainty about taxes in general.
At the same time, deficit watchers fear the measures' impact on the nearly $14 trillion federal debt.
On Monday, Moody's Investors Service warned it was considering cutting the United States' top-notch triple-A bond rating in the next two years if the package becomes law because it would push up debt levels.
VOTE COMING SOON
Worries about the bill's potential affect on the federal deficit prompted a two-day sell-off of Treasury bonds last week, and on Tuesday the yield of the benchmark 10-year note rose further to 3.39 percent as the market reacted to other economic data.
The tax measure could come to the Senate floor for a vote on final passage as early as Tuesday and the House would begin to take up the bill on Wednesday.
Lawmakers have said they want to recess for the year by the end of the week, though that timeline is tentative.
Many House Democrats believe Obama struck an especially bad deal on the estate tax, conceding to Republican demands it exempt the first $5 million of inherited assets from taxes, with estates above that taxed at 35 percent.
Democrats favor a $3.5 million exemption and a 45 percent tax rate.
Hoyer said many Democrats want a separate amendment on the estate tax, but also said there is concern that debate over estate taxes could derail the whole deal and that no decision had been made.
Still, a senior House Democratic aide on Tuesday said he doubts there are enough members to back a weakened estate tax at this point.
The House passed a Democratic-preferred estate tax last year by a vote of 225 to 200, with about two dozen Democrats voting with Republicans.
Hoyer said he didn't know if such an amendment would pass the House. Nearly 50 Democrats wrote House Speaker Nancy Pelosi before the elections backing the Republican plan to extend all the Bush-era tax rates.
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